Headline Hockey Sports Law

Residency – Not A Decision To Be Left On Ice

This is a guest post by Jeffrey Steinberg C.A., Partner, Audit & Advisory at Soberman LLP.

You have just signed a contract, and are ready to embark on or continue your career as a professional hockey player. But then it blindsides you like an open-ice body check – the realization that you must share part of your earnings with the Canadian government, the U.S. government, or both. The questions then become: in which country must you pay income tax, and how much will you pay?

The answers can be surprisingly complex. Let’s examine situations in which you would have to file a Canadian personal income tax return.

There are two scenarios in which a professional hockey player is subject to Canadian tax.

  • If he is a resident of Canada, he pays Canadian tax on his worldwide income, no matter where he plays.
  • If he is NOT a Canadian resident, he will pay Canadian tax if he plays on a Canadian-based team. In this scenario, only the games he actually plays in Canada will be subject to Canadian income tax.

As such, the main factor in determining how much Canadian income tax a player must pay is his residency status.

Figuring out where a player resides seems like it should be a simple concept – but in fact, it’s not always straightforward. Someone’s residency status can only be determined on a case-by-case basis, and takes into consideration several factors (or residential ties).

The primary residential ties in determining if someone is a tax resident of Canada are: the location of his home and where his spouse and/or dependents reside.

In addition, there are many secondary ties that apply, which a player can examine to assist in his residency determination:

  • personal property (cars, clothing, furniture)
  • social ties (gym, golf and religious memberships)
  • economic ties (bank accounts, RRSP, credit cards, broker accounts)
  • hospitalization coverage (health insurance plans)
  • origin of driver’s license, vehicle registration or passports
  • seasonal dwellings or memberships in Canadian organizations

No one secondary tie will bind someone to Canada, but these ties must be considered in determining his residency status. The more secondary ties to Canada a player has, the more likely he is to be considered a Canadian resident.

It often happens that a player will be considered both a resident of Canada and a resident of another country. For such cases, Canada holds tax treaties with many countries – including the United States and most European countries – that include tie-breaker rules. Most modern treaties review first and foremost the location of a person’s permanent residence, followed by his social and economic ties. If none of these factors points to one country over another, habitual abode and citizenship are taken into account.

The amount of income tax you pay can vary greatly depending on the state, province or even city you live in. In addition, what may work for you, may not work for your teammate. Through proper arrangement of your affairs, you can stick handle yourself to the appropriate country!

By Darren Heitner

Darren Heitner created Sports Agent Blog as a New Year's Resolution on December 31, 2005. Originally titled, "I Want To Be A Sports Agent," the website was founded with the intention of causing Heitner to learn more about the profession that he wanted to join, meet reputable individuals in the space and force himself to stay on top of the latest news and trends.

Heitner now runs Heitner Legal, P.L.L.C., which is a law firm with many practice areas, including sports law and contract law. Heitner has represented numerous athletes and sports agents as legal counsel. He has also served as an Adjunct Professor at Indiana University Bloomington from 2011-2014, where he created and taught a course titled, Sport Agency Management, which included subjects ranging from NCAA regulations to athlete agent certification and the rules governing the profession. Heitner serves as an Adjunct Professor at the University of Florida Levin College of Law, where he teaches a Sports Law class that includes case law surrounding athlete agents and the NCAA rules.

One reply on “Residency – Not A Decision To Be Left On Ice”

Great article. I’d like to learn more about taxation of income among the 50 U.S. states. And how about among the Canadian provinces, does each province have an income tax?

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